If you ever find yourself wondering when the real M&A negotiations will take place, it is already too late. They probably began a long time ago.
A lot of people think that the negotiations only begin when you call the seller. Applied deal tactics and negotiation skills start long before this ‘first point of contact,’ because whether you realize it or not, your company already has a reputation of some kind in M&A. Maybe you are known for not doing any M&A whatsoever. Maybe you are known for your M&A failures. Or maybe you have a reputation for being M&A savvy, with a brutal takeover approach and severe cost cuttings.
Just over 10 years ago, one of our M&A Elite companies was not highly active in M&A. It was formally decided internally that there would be a new corporate strategy to create growth by acquiring competing firms. As it turned out, executing this new M&A strategy was not easy.
The firm felt that the international M&A scene didn't take them seriously. This made the CEO decide to hire a strong external advisor—an investment bank.
In the aftermath of its first corporate M&A transaction, the CEO realized that the internal corporate team were actually the ones to identify realistic cost synergies, not the investment bank.
After the transaction, the CEO felt that the price he paid for the investment bank, and their terms and conditions, were way above the value that was provided to his firm. So, before the next deal took ...